Posted by Brendan Fischer on February 10, 2014

The ALEC BunchWisconsin is the latest state to line up behind a national effort to amend the Constitution and cripple the federal government's ability to spend -- likely forcing steep cuts in popular earned benefit programs such as Social Security and blocking Congress from responding to economic downturns or natural disasters -- apparently with the ultimate goal of completely overhauling America's system of governance.

Assembly Joint Resolution 81, which passed out of committee on Wednesday, would call for an Article V Constitutional Convention to force a federal balanced budget amendment. Article V of the U.S. Constitution provides that thirty-four states (two-thirds) can trigger a convention to propose an amendment, which must then be ratified by 38 states (three-fourths). The legislation closely tracks the "Balanced Budget Amendment Resolution" from the American Legislative Exchange Council (ALEC) and allied advocacy groups promoting an Article V convention.

ALEC's Stealth Convention

"AJR 81 comes right out of the 'Convention of States' workshop and materials presented at ALEC where state legislators were promised bundled campaign contributions and grassroots support if they joined this effort to amend the federal constitution," said Rep. Chris Taylor, a Madison Democrat who attended ALEC's Annual Meeting in Chicago last summer, in a statement. "I am alarmed that this effort is now making its way through the Wisconsin legislature and is tentatively scheduled to be considered by the full Assembly next Tuesday."

ALEC has published a "how-to" manual for an Article V constitutional amendment, and at its last two meetings hosted workshops on amendment strategy from the group "Citizens for Self Governance," led by Tea Party Patriots co-founder Mark Meckler, and whose board includes WisconsiniteEric O'Keefe (who has spoken publicly about being subpoenaed in Wisconsin's John Doe probe in his role as Director of Wisconsin Club for Growth). Citizens for Self Governance seeks to use the amendment process to severely restrict federal power, for example by redefining the Commerce Clause to prohibit Congress from enacting child labor or anti-discrimination laws. In recent years, the Article V idea has spread in Republican circles thanks to right-wing radio host and author Mark Levin, and has been elevated by the likes of Glenn Beck.

Following ALEC's December 2013 meeting in Washington D.C., the primary sponsor of AJR 81, Wisconsin Rep. Chris Kapenga (R-Delafield), co-organized a convening of around 100 state legislators to discuss the Article V amendment process. (Last year, Rep. Kapenga was one of nine Wisconsin lawmakers who told a Tea Party group they wouldseek to arrest federal officials implementing the Affordable Care Act in the state). A followup meeting is planned for Spring of this year.

The push for a constitutional convention has garnered limited attention in the mainstream media. "A lot of Americans outside of these conservative circles have no idea this is going on, that all of these strategies are being developed to basically neuter the federal government, and what the ramifications of those strategies would be in the long run," says Rachel Tabachnik, a research fellow at Political Research Associates, who has tracked the evolution of "state's rights" efforts to amend the constitution. "These states are seeking to undo all civil rights, social safety nets, and regulatory functions that they don't want."

Amendment Would Cripple the Government's Ability to Respond to Economic Crises and Disasters

Although some advocates have pushed for a broader call for a constitutional convention -- the Convention of States group, for example, hopes to "call a convention for a particular subject rather than a particular amendment" to radically alter state-federal relations -- AJR 81 is focused more narrowly on calling for a balanced budget amendment.

Since World War II, the federal government has deliberately used deficit spending as a policy tool to soften economic downturns, preventing recessions from turning into depressions by spending on programs like unemployment benefits, targeted tax breaks, or jobs training. Tax revenues decline during a recession, just as these necessary expenditures increase. Similarly, natural disasters can wreak havoc on the economy, and disaster relief can also require deficit spending. A Balanced Budget Amendment would handcuff the government at a time when economic crises, drought, and catastrophic hurricanes are on the rise.

As Jon Peacock of the Wisconsin Budget Project explains:

A balanced budget amendment in the U.S. Constitution would result in much longer and deeper recessions and would cause unnecessary job losses. When the economy goes into a dive and people are without jobs, the need for food stamps, health insurance and unemployment insurance rise sharply. Since tax revenue typically falls as the need for those programs rises, a balanced budget would require cuts to these safety net programs and other areas of spending at the worst possible time. That would not only take away vital help during a recession, but would also exacerbate the downturn by requiring program cuts and/or tax increases as the recession worsens.

A highly respected economic forecasting firm, Macroeconomic Advisers, considered the effects of a balanced budget amendment during a period like the recent recession. They described the impact on the economy of cutting spending at such a time as "catastrophic" -- leading to depression-like conditions and millions of additional jobs lost. A balanced budget amendment is also likely to jeopardize Social Security and other earned assistance upon which retirees depend.

Companion Bill to Rein-In "Runaway Convention" Reflects ALEC Model

The right is not united in their support for the Article V constitutional amendment effort. The U.S. Constitution has never been amended through the Article V process, and many fear a "runaway convention" where delegates approve amendments other than a balanced budget -- for example, an amendment that would address the harm caused by the Supreme Court's Citizens United decision. The Heritage Foundation opposes an Article V convention for these reasons. One of the most consistent critics of the Article V effort has been The John Birch Society; the Convention of States group has taken their criticism seriously enough to post a response on their website.

In response to those fears, Rep. Kapenga has introduced a companion bill, AB 635, aimed at stymieing a "runaway convention" by declaring that delegates to the convention may not vote on other issues besides the balanced budget amendment, and providing that those who do will be immediately dismissed by the other delegates. This is nearly a word-for-word copy of the ALEC "Resolution for Limitations on Authority of state Delegates to a 'Convention for Proposing Amendments' under Article V of the US Constitution."

"You really don't need people to do this"

Almost every Republican member of the Wisconsin Assembly has signed on as co-sponsors to AJR 81 and AB 635. Lobbying for the bill in Wisconsin are Americans for Prosperity, the state U.S. Chamber of Commerce affiliate Wisconsin Manufacturers and Commerce, as well as the National Federation of Independent Business, which purports to represent small business but is a front for right-wing corporate interests.

Outside of Tea Party circles, it does not appear that most Wisconsinites were clamoring for their legislators to push this proposal. But it does not appear that citizen support is a necessary component of the Article V convention effort.

At last year's ALEC meeting in Chicago, where an Article V convention was discussed, Rep. Taylor recounted a conversation with a private sector ALEC member. In response to her concerns about average Americans not wanting a radical overhaul of their Constitution, he told her:

"You really don't need people to do this. You just need control over the legislature and you need money, and we have both."

Brendan Fischer

Brendan Fischer is CMD's General Counsel. He graduated with honors from the University of Wisconsin Law School.

Comments

To the conservatives, be careful what you wish for. The big money, which would have to be cut, is in the military and corporate subsidies. The money necessary for a federally balanced budget doesn't exist in the so called entitlement programs. Picking the low hanging fruit, Medicare, Medicaid, SS, etc., sounds good to conservatives, but the only way to actually balance the federal budget over the long term is to trim the tree from the top. The top of the federal budget tree is the military, big oil subsidies, big ag subsidies, big pharma subsidies, etc.

Your article is so one-sided I just have to laugh. The fact that you say a BBA would, "...Forcing steeps cuts in Social Security and blocking Congress from responding to economic downturns or natural disasters" is simply not true. The BBA would require the federal government to not spend more than it made. Nothing more, nothing less. If our elected officials decide to cut disaster funding or welfare instead of 'bridges to nowhere' or Mexican economic development that is our fault for electing them. A BBA amendment is one of the few ways that we can pull back the growth of the federal government and put it in check. Both parties are growing more and more powerful, stomping on our freedoms. I look forward to a Convention I plan to help educate Americans so they can see that this is beneficial for all of us, no matter your party.

The math is simple and the concepts are simple ... but obscured.
If the Govt is not spending more INTO the private sector than it confiscates in taxes, then it is confiscating more money FROM the private sector than it adds. John Stuart Mill stated 100 years ago, recessions and depressions are all caused by an insufficient and/or falling money supply. You can find the precise quote.

Why would any conservative want the OPPOSITE of tax relief and financial growth? ALL federal spending ultimately circulates in the economy as wages, salaries, profits, stock dividends, etc. unless and until that spending is removed from the economy by some means.

Taxation is only ONE way our domestic Dollar supply is reduced. Imports --- including "outsourcing" --- favored by Big Business such as the US Chamber of Commerce and other "cheap labor" advocates -- brings inexpensive goods into America, usually via domestic corporations moreso than foreign importers or direct citizen purchases from abroad. Yet at the same time, US Dollars are DRAINED OUT of the domestic economy, landing in foreign-held savings accounts, Treasury Securities accounts held at the Fed. The simple point is imports reduce the domestic dollar supply that sustains both profits and jobs.

Banks are thought to create loans out of savings of other customers, thereby shifting funds from savers to borrowers, from patient to impatient spenders, including business loans. Conservatives believe this but so does Krugman and many other liberal economists. Others believe that banks create loans on a "fractional reserve" basis, as a multiple of funds they receive from the Govt or Fed. All of that is a false misunderstanding.

The reality, well-documented and not at all controversial, is that banks create loans "out of thin air" without direct regards to a "pool" of savings. To be more precise, banks write up legal contracts called Debt Obligations, which are ASSETS of the bank, and at the same time create new Deposits (loan proceeds) in Accounts, which are then the LIABILITIES of the bank. Of course these Liabilities or bank balances are typically transferred from the borrower to some Third Party, a house-seller or other bank, a car dealer, some other retailer.

RESERVES -- fractional or otherwise --- are not at issue with lending, except for overnight INTERBANK lending, where Bank A loans reserves to Bank B to satisfy Fed requirements and to process overnight clearing of checks and payments. In that case, LESS reserves held by banks causes higher interest rates and greater profits on Interbank loans.

The point of that explanation is that since savings by bank customers -- individual and corporate --- is NOT a source of bank-created credit, and savings is by definition "not spending" aka "unspent income", savings by US citizens and corporations is also a net reduction in our domestic money supply. Apple for example is sitting on many Billions in corporate cash savings, which is Billions of Dollars which are NOT circulating to create Demand, Sales, Profits, Jobs, etc.

Expansion of bank lending --- not happening now or during any recession, since that is typically directed at Real Estate or other collateral, forming "collateralized debt obligations" (CDOs) which are assets of the lender, such lending DOES tend to grow the overall supply of Dollars "in circulation", but at the cost of increasing PRIVATE sector debt loads. We saw what happened around 2006-2007 and beyond, when the private sector debt load reached a peak of viability in the Housing Bubble, the supply of credit-money in the entire economy stopped growing and started to contract.

Moreover, such credit-dollars can NEVER become "net savings" among private sector business and individuals for what should be obvious reasons. Getting a cash advance and putting that into savings cannot constitute wealth or "net worth". Each credit-dollar is counter-balanced by a debt obligation. Loans can result in growth in economic activity, but not growth in overall net private wealth.

Ergo, ONLY a Sovereign Currency Issuer has the capability of creating private sector wealth (stock) and sufficient private sector dollars which constitute FLOW of Dollars in circulation. US Federal Government is a such a sovereign currency issuer. Nobody else creates US Dollars.. China does not have a Dollar-printing machine or govt agency. All the Dollars that China parks in the United States, in Treasury Securities, CAME FROM the United States in the first place.

The Govt creates Dollars in a similar manner to how Banks create Credit Dollars. Congress & Treasury issue an order to the Fed to increase the balance of some recipients bank account. That funding doesn't "come from" anywhere, other than the Govt's legal lawful Constitutional powers to issue payments. (The process of spending between Treasury & Fed & private banks is convoluted and a bit opaque, and a bit too complicated to address here.)

If you REALLY believe that the US Govt should have as minimal spending as possible --- minimal spending for the Pentagon or roads or any programs of any kind, minimal spending on corporate subsidies and support, minimal spending for "social welfare" of any kind for unemployed OR low-wage workers, no more federal allocations to States for local spending -- then at very least this IDEOLOGICAL ARGUMENT would want Big Deficit Spending brought on by radical tax cuts for the POOR and middle class. This could include drastic cuts to Social Security -- while keeping the Soc Security program.

Funny -- but not too funny -- that conservatives have OPPOSED middle class and working class (same class, really) tax cuts which would let working people "keep more of their paychecks". Instead, they want to KEEP Payroll Taxes aka FICA -- which Reagan increased dramatically for no sound reasons --- but hand over the revenue to Wall Street. They already tested this in Chile after Allende was murdered in coup, and fascist General Pinochet took over. The result was that the privatized Social Security of Chile was wiped out, drained of assets, and Pinochet eventually had to prop it up with the "socialized" copper mines that had been appropriated from Anaconda by his predecessor.

Capitalist economies NEED govt deficit spending for growth. Big Corporations 100- years ago understood this and lobbied for and received massive growth in Govt Spending and intervention, to boost profits ... and "create more jobs". This was during the Robber Baron era. Corporate profits were down, because consumer demand was insufficient to match expanded large scale industrial production. The economic problem of the First World shifted from one of scarcity of goods for the entirety of human existence to a crisis of abundance, of unsold surplus, of insufficient sales and profits. The old Capitalists, while greedy and unfair, were correct that the economy needed Govt Deficits. That was the REPUBLICAN-run "Progressive Era", with "progress" defined as Govt Intervention in managing and boosting and regulating and stimulating capitalism.

The "New Deal" can be seen as merely a continuation of that GOP-run Progressive Era, such that more govt spending to boost Demand was handed off to American consumers, instead of ONLY giving "welfare" to deserving "already rich" people and their corporations.

A Balanced Budget by definition --- even approaching a balanced budget such that the Govt spends LESS than what is DRAINED off by the combination of net corporate imports and net private unspent savings -- is a mathematically-guaranteed recipe for ongoing contraction in our money supply. This means that --- like in the Great Depression --- funds borrowed by industry and farmers at the beginning of a production cycle, were matched by lower retail prices later on, resulting in waves of bankruptcies, destruction of real wealth, and a handover of real assets --- farmland, production machinery, etc. --- to the creditors, who tried to sell that off at a loss to someone else. A balanced budget is a perfect mathematical recipe for a permanent recession and/or depression.

Eliminating the so-called "national debt" would mean eliminating $17 Trillion in private savings aka financial wealth held by the private sector, currently in the form of Treasury Securities sold to banks and to investment firms and to private investors. The "national debt" is a SERVICE that the Govt provides to Rich People aka Savers in our Capitalist System. These are nothing more than special Accounts the Govt provides for people and corporations to store their wealth, esp when their savings exceeds limits of guarantees on private bank accounts, which stop at $150,000. This SERVICE is that banks use to drain down their surplus reserves they don't want to hold dormant.

Does anyone seriously believe that Congress -- especially Conservatives -- are eager to wipe out the savings and interest earnings that go from the Govt to the top 10% or top 1% of Americans? Does anyone believe that the 1% would ALLOW this "national debt" -- their Treasury Security savings --- to be eliminated, that they would allow their own food supply of Interest Payments to be cut? Please. Be serious.

The US is using an unbacked fiat currency that it can never "run out" of and as it's unbacked, it doesn't have to get anything from anywhere to produce that currency, aside from the paper, ink, etc., (which it pays for in dollars) or a computer system to create the electronic version (the lion's share of USD today). The only obligation it incurs from creating those dollars is a liability against it's own Federal taxes. If it creates and spends too many dollars, then we will have consumer-driven inflation. Too few and we will have recession and unemployment.

The BBA is nonsense, based in a belief that the Federal Gov't needs to fund itself via Federal taxes and that the finances of the Gov't are like the finances of a household. Neutralize this basic error and the remainder of the agenda of those pushing the con-con will have to stand on it's own legs, unsupported by the "balanced budget" fraud.

The con-con or convention of states as it's being marketed is a fools errand. It is naive and simplistic to believe that adding words to something that is already being ignored will fix the problem. The Constitution is not broken. It's the voters. I don't want a BBA because like the Clinton surplus they will simply move items off the budget or simply won't pass a budget as they do now. Talk about fear mongering that will be done using a BB as the excuse. Also how will the right control the nature of the amendments. There are 29 states with left leaning legislatures. Oh but of course a large majority of states will ultimately have to ratify any amendments. Remember the 16, 17, and 18 amendments. They got ratified and only one was repealed. There is no protection against unwanted measures and unintended consequences with this foolish effort. I don't want term limits either since when someone worthwhile is elected and reaches their limit my right to elect representatives of my choice would be infringed by being denied the ability to vote for my choice. No the simpletons are really lining up behind the "wise men" on this one!